Newsletter

Business of Nonprofits: Crisis, opportunity in the nonprofit sector

The downturn in the nation's economy is having a transformative effect on Georgia's nonprofit community, with both challenges and opportunities emerging.

Nonprofits today have never before managed through a recession of such intensity.

Human services organizations have experienced dramatic increases in demand for service, while simultaneously experiencing declines in funding sources. On the other hand, some arts and culture organizations have seen decreases in demand and are struggling to maintain programs because of changes in consumers' spending priorities.

Nonprofits are struggling with sustainability issues and reporting that their cash flows are challenged. There is a rising use of credit lines, reserve funds, restricted funds and endowment funds by nonprofits.

The Georgia Center for Nonprofits has recently released a report, "Weathering the Storm: the Economy's Impact on Georgia's Nonprofits." The report examines the current environment in which Georgia nonprofits are operating, how nonprofits are reacting and what they need to meet the challenges ahead.

Following are highlights from the report.

The sense of urgency nonprofits are feeling is driving a closer examination of their work, methods and outcomes. As they contend with declining revenues, they are reacting in various ways, from increasing fundraising efforts to cutting program or operating expenses.

The top strategy has been to increase fundraising and marketing activity, and there is a stronger focus on the use of traditional marketing techniques.

One of the study's goals was to identify the skills and resources nonprofits say they need to be most effective. Nonprofit professionals in Georgia need support to meet these challenges.

They reported a high need for "skill-based classes, networking and affinity groups to exchange ideas and systems for sharing resources effectively."

They are asking for help in planning and financing work around mergers, collaborative efforts and consolidations. And they are seeking help in adopting new approaches to meeting demand through technology, the use of skilled volunteers and deepened board engagement.

When asked about the skill level of staff and board members needed for dealing effectively with increased demand, skill deficits were identified for board members and for staff in finance, development and program delivery.

Marketing and fundraising were the two areas ranked most often as "fair or poor" relative to nonprofit capacity or the skill level of staff to meet current needs.

Nonprofits wanted to diversify revenue sources so the organization is less vulnerable and wanted their boards to rigorously exercise financial oversight.

They are seeking creative ways to bolster staff morale and to use volunteers to fill gaps created by staff reductions or to meet increased program demands.

They want to become more effective advocates with government officials to increase their awareness of needs. And they seek to develop effective partnerships that can be used to fill gaps created by increased demand and diminished funding.

Approximately one third of respondents expected to examine their current operating assumptions in response to the economic climate and to possibly emerge as a fundamentally different organization over the next one to three years.

Such a reassessment could result in changes from a shift in mission focus to expanded or reduced geographic focus or size and the scope of the organization.

Many nonprofits expect to change how they conduct outreach to clients or various populations. Almost a quarter of respondents expected to increase programs, and more than 50 percent expected to hold programs at current levels despite the economic downturn.

The nonprofit leaders surveyed were also considering mergers, shared services and collaborative marketing.

"Nonprofits trying to weather this storm will need to be well-prepared, realistic and innovative - and they will absolutely need to demonstrate best practices to make it through intact," the report states.

It is hoped by the Georgia Center for Nonprofits that this report and other quarterly reports to follow will identify the leading indicators of sector changes, provide a perspective on what is working in this challenging climate and serve as a tool to benchmark organizational performance against peers in the sector.

Sarah Todd is regional manager for the Georgia Center for Nonprofits, Georgia's association for nonprofits, part of a nationwide network of nonprofit associations. She can be reached at 912-234-9688 or st@gcn.org. The Georgia Center's Web site is www.gcn.org.